IT Sourcing Decisions Research Articles

Reconciling agile frameworks with IT sourcing through an IT sourcing dimensions map and structured decision-making

While there is a plethora of literature on IT Sourcing (ITS) strategy, little is known about the impact of large-scale agile frameworks on these strategies. Empirical evidence suggests that application of agile frameworks has an impact on governance and processes in large organisations including ITS strategies. Yet, the effects of such frameworks remain unrevealed. This research investigates the impact of agile frameworks on ITS decisions and the way organisations configure their ITS strategies. The research first studies literature to realise that there is a lack of empirical research on ITS strategies in organisations that use agile frameworks. Then, through a systematic literature review, ten different dimensions of ITS are identified and used as the required construct for a multiple-case study at six Netherlands-based organisations. The results reveal that four dimensions, namely sourcing model, location, pricing model, and relational governance are mostly affected by agile frameworks. Furthermore, after more than three years of utilising agile frameworks, case organisations still have not discovered a proper optimum point for these dimensions. The results also uncover that organisations are not fully aware of the impact of agile transformation on the process of ITS decision-making. This process may remain intact for years, resulting in continuous experimentation and trial and error of ITS strategies. We conclude that organisations should recognise the effects of agile frameworks to make ITS decisions accordingly. Additionally, adhering to a more rational and structured decision-making process helps organisations to more efficiently find proper optimum points for the dimensions of ITS strategy.

A Case Study Using the Analytic Hierarchy Process for IT Outsourcing Decision Making

Decisions related to managing IT resources - which resources to keep in-house and which resources to outsource - are critical to business success. The goal of this paper is to show the usefulness of the Analytic Hierarchy Process (AHP) as a decision-making tool for IT sourcing decisions, based on an analysis of factors that recent literature found to be associated with IT sourcing risk. Although the AHP previously has been suggested for IT outsourcing decision making, this study is the first to consider evaluating the risks of offshore outsourcing, rural outsourcing, and in-sourcing IT processes by using the AHP. From the perspective of the expert decision maker, three IT sourcing strategies were evaluated with respect to 58 criteria. The case study example presented in this paper shows the effectiveness of the AHP to support management for this business decision. The authors' results show that a systematic approach to analyzing outsourcing can reduce the uncertainty and risk that is common in such decisions.

Escaping ‘localisms’ in IT sourcing: tracing changes in institutional logics in an Italian firm

Organizations are limited in their choices by the institutional environment in which they operate. This is particularly true for IT sourcing decisions that go beyond cost considerations and are constrained by traditions, geographical location, and social networks. This article investigates how a company can disentangle itself from the constraints of the institutional environment. We do so drawing on a longitudinal case study of an Italian SME active in the steel industry that successfully changed its institutionally sound, but increasingly inefficient, IT sourcing practice. Our main result suggests that by attending steadily to institutional logics, organizations can become selective in how the institutional environment influences them and act more purposefully in their decisions. In particular, through the creation of companywide IT management competencies and targeted hiring practices, organizations can strike a balance between the different institutional logics guiding IT sourcing decisions and eventually shift from the dominant logic of localism to a logic of market efficiency. This change does not depend from a choice but rather builds on a process through which IT management competences are slowly integrated in the organization.

IT Backsourcing: Is it the Solution to Innovation?

This research paper explores a relatively unknown field, the notion of backsourcing in the context of innovation. It explores the relationship between the services supplied by IT vendors and the demand of firms in the financial services sector for innovation-driven business solutions to lead them out of recession and provides reasons for what motivates the backsourcing decision and suggests best practices for backsourcing. The likely future effects of a shift to more backsourcing are also examined.A range of managerial economics, strategic, management and innovation theories are applied to the backsourcing phenomena in the context of innovation, including Total Innovation Management (TIM), Porter’s generic value chain and Hanson and Birkinshaw’s innovation value chain.This paper is of particular interest to those responsible for innovation, IT sourcing decisions and vendors of IT services.

Management Control of Support Services: The Case of IT Sourcing

This paper provides evidence on the factors that influence the design of the control arrangements that govern support services. Based on TCE, we hypothesize that control structure choices depend on asset specificity, uncertainty, and frequency. Using survey data on IT sourcing decisions from 89 firms in the construction industry, we find support for most of our hypotheses. Our results indicate that asset specificity negatively affects firms’ propensity to outsource, and that (behavioural) uncertainty intensifies this negative effect. As expected, we also find that frequency has a negative direct effect on the willingness to outsource IT services provision. However, we find no support for the hypothesized interaction between asset specificity and frequency.

Value-at-risk in service-oriented systems: a framework for managing a vendor's portfolio uncertainties

We present a method for analysing a vendor's exposure to uncertainties in IT services. These uncertainties arise in project portfolios with projects whose value covaries with managerial decisions about firm strategy, technology standards and platforms to be used. Past research involving information systems (IS) decision-making under uncertainty has focused on real options methods which inform a priori investment decisions. We explore methodologies associated with asset valuation theory in financial economics called value-at-risk (VaR), which measures the worst expected loss over a time horizon under normal market conditions at a given confidence interval. We show that VaR analysis informs management on how to leverage existing capabilities and risk exposures to inform the IT sourcing decision and ongoing IT services risk management. We explore information requirements, outcomes and limitations for VaR. We also present an evaluative framework to help a senior manager to bring these concepts into use in a real-world organisation.

Use of Transaction Cost Economics to Study Information Technology Outsourcing: Over-Application or Under-Theorizing?

IS discipline has witnessed significant growth in research on IT in- and out-sourcing. Economic theories inform a large portion of this work. This paper examines the use of Transaction Cost Economics (TCE) as a theoretical lens to study IT sourcing decisions (internal vs. external). It reviews TCE's major assumptions and assesses its key constructs: frequency, asset specificity, opportunism, and uncertainty, with regard to how they have been operationalized and what results have been obtained. This is done through a review of selected body of outsourcing literature. There is evidence of the impacts of production costs on outsourcing decisions, while findings with regard to transaction costs are inconclusive. In order to move the research agenda ahead we suggest examining the co-evolution of drivers for buyers and vendors to outsource, instead of just exploring cost determinants. We recommend that researchers take a longitudinal process perspective to improve our understanding of complex governance phenomena.

IT sourcing: a research framework

It is only during the past few years that the sourcing of IT has become an important issue for most organisations. Downsizing, the move to flatten organisations and the search for added flexibility, are cited as major reasons for this interest. Additionally, for the UK public sector, government pressure and legislative requirements have been instrumental in making many organisations consider outsourcing. Transaction cost analysis provides an economic approach to selecting the most appropriate source. However, in itself it is not enough, since it fails to take account of the special features of knowledge-intensive goods and services. This form of analysis needs to be augmented with considerations of these special features and of the organisational and environmental factors surrounding the sourcing decision. This paper provides this augmentation within a comprehensive framework for IT sourcing decision making.

Analysing four types of IT sourcing decisions in the context of scale, client/supplier interdependency and risk mitigation

The main thrust of the article is to distinguish between four types of IT sourcing decision: total outsourcing; multiple‐supplier sourcing; joint venture/strategic alliance sourcing; and insourcing. To illustrate each type, detailed case histories are used that analyse the reasons why specific IT sourcing decisions were adopted. Here, we consider total outsourcing at the London Stock Exchange; multiple‐supplier sourcing at ICI plc; joint venture project sourcing at CRESTCo Ltd; and insourcing at the Royal Bank of Scotland. The trend towards outsourcing is increasing in all industrial and commercial sectors. However, client organizations need to become more aware of some of the pitfalls, particularly in respect of large‐scale outsourcing deals to single or multiple suppliers. This is because the move to IT outsourcing engenders the need to develop new capabilities and skills to manage complex commercial contracts. We therefore conclude that, while many IT outsourcing contracts followed rationalization, cost‐cutting and disappointing results from in‐house IT provision, short‐termism and current uncertainties over market, business and political conditions pose problems for many organizations in deciding future outsourcing arrangements.

A framework for deciding what to outsource in information technology

The theory and background of outsourcing are examined from a general perspective. It is concluded that the pressures to outsource activities can best be understood through two main sources: the work of organization theorists on the management of organizational complexity and the transaction economics approach of Williamson which argues the virtues of provision of many organizational services through market mechanisms rather than by internal departments. Within IT, the early motivation for outsourcing was the cost reduction one implied by the Williamson approach. However, a number of authors have argued that the complexity of managing IT outsourcing means that it is often preferable to try to improve the efficiency of internal suppliers. This suggests that there is a need to develop a framework that will enable a decision to be made about what to outsource and what to insource. A model is applied to the IT sourcing decision.

A Framework for Deciding what to Outsource in Information Technology

The theory and background of outsourcing are examined from a general perspective. It is concluded that the pressures to outsource activities can best be understood through two main sources: the work of organization theorists on the management of organizational complexity and the transaction economics approach of Williamson which argues the virtues of provision of many organizational services through market mechanisms rather than by internal departments. Within IT, the early motivation for outsourcing was the cost reduction one implied by the Williamson approach. However, a number of authors have argued that the complexity of managing IT outsourcing means that it is often preferable to try to improve the efficiency of internal suppliers. This suggests that there is a need to develop a framework that will enable a decision to be made about what to outsource and what to insource. A model is applied to the IT sourcing decision.